CFA Practice Question

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CFA Practice Question

You have a nest egg of $750. In order for your money to grow to $946.88, it must be invested at 6% for how many years?

A. 3
B. 4
C. 5
Correct Answer: B

Years = [Log(946.88/750)]/[Log1.06] = 4

User Contributed Comments 17

User Comment
dipta Set P/Y = 1, 750:PV; -946.88:FV; 6:I/Y. CPT N
KD101 Dipta Thanks - it is easier and more consistent to learn than remembering different formulas
mark72 yes these are straight forward examples to do with a financial calc
SriSri Can someone explain why PV is + and FV is - when using Cal pls.
jdesine PV is considered to be the money you are investing. So it is considered as money going out and so is considered negative.
On the other hand FV is money coming in so considered Positive. Hope this helps.
HeroEarth I am still having trouble calculating it from Dipta on this. Can someone help me out?

I went to P/Y but cannot get out to PV...
alallstar no need for P/Y, at least on the BA II+
PV = -750
FV = 946.88
I = 6
CPT N and you get 4.00
Vikku SriSri, you are correct: PV must be - & FV +.
gazza77 If you've got a nest egg of $946, my advice is to invest in a gun and a large calibre bullet
dcfa using FV formula,
946.88=750* (1.06)^N
946.88/750 = (1.06)^N

take log on both sides

log(946.88/750) = N * log 1.06
(using: log (m^n) = n * log m)

=> N = log(946.88/750) / log 1.06
=> N=4
hoyleng how come my cal shows Error 5.? pls help. thanks
harpalani @Dipta: You have to set PV as -750 and FV as 946.88 in TI BA II
Kaloyan To hoyleng. I suppose you use HP 12 C. First read the manual. :-) Kidding. The reason you are getting the Error 5 is because you input both your PV and FV with the same sign. In this example, your PV should be with a - sign and your FV with a + sign. Hope this is of help.
johntan1979 To be exact, it's 4 years and 3.5 hours ;)
chipster thanks jdesine
MattG @gazza77 lmfao
elsaharty HP12c, Please
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